Applied Digital and CoreWeave ink 15-year lease worth $7 billion

Applied Digital said on Monday it has entered into two 15-year leases with CoreWeave, a specialized cloud services provider backed by Nvidia, which will generate about $7 billion in revenue for the data center operator over the lease period.

WHY IT’S IMPORTANT

The deal could prove to be a major lifeline for Applied Digital, which has been facing challenges in the data center hosting sector as it transitions into a data center real estate investment trust.

The company’s shares surged by 17 per cent in premarket trading following the lease announcement.

KEY QUOTES

“These leases solidify Applied Digital’s position as an emerging provider of infrastructure critical to the next generation of artificial intelligence and high-performance computing,” CEO of Applied Digital, Wes Cummins, said in a statement.

“Through these newly signed long-term leases with CoreWeave, we are taking a step forward in our strategic expansion into advanced compute infrastructure.”

CONTEXT

The emergence of new cloud service providers, known as “neoclouds” like CoreWeave, focuses on renting Nvidia’s highly sought-after chips to software developers.

Leasing data center infrastructure from companies like Applied Digital helps reduce some of the financial burden of providing AI-centric cloud services.

CoreWeave’s shares were up close to 4 per cent.